22 February 2014

Ethiopia: Change the Laws and Boost Investment, Workshop Tells Govt

Various companies have proposed that the government introduce better petroleum and mining laws to help boost the potentially lucrative industry. During a two-day workshop at the Harmony Hotel organized by the renowned consultancy firm Deloitte Ethiopia earlier this week, representatives of different companies said that Ethiopia has immense mineral and petroleum resources, adding that the government should improve the existing mining and petroleum laws to attract more direct foreign investments.

Haileleule Tamiru, managing partner of Deloitte Ethiopia, said that his company (HST consulting), has represented Deloitte in Ethiopia since 2003. Deloitte consults on corporate finance, tax and audit, working closely with banks, mining, oil and gas companies, among others. Last year the company organized a workshop for the banking sector, and is currently planning to organize similar workshops for different sectors. Haileleule told The Reporter that oil was discovered in South Sudan, Uganda, and Kenya. "Somalia also has oil. Ethiopia will discover oil. And we need to be prepared. The right legal framework should be there, and we will need to build our capacity," he said.

Representative from the Ministry of Mines, Almaz Belayneh, in her keynote address said that currently there are 12 international petroleum companies engaged in oil and gas exploration in different parts of the country. Almaz said that this was a good start, adding that the ongoing exploration work will eventually bear fruit. Tadesse Tilahun, CEO of National Oil Company (NOC), echoed that oil is being discovered in different east African countries, saying that it would be wise if the region could work together to build oil pipelines and refineries.

"It would be commendable if they could share these resources. Ethiopia has already started exporting electric power to Djibouti and Sudan, and is in the process of selling power to Kenya. This should be emulated in the oil sector. This is how we can economically integrate Africa," he told the participants. Some members expressed their concern about what would happen if oil is discovered before having the right legal framework. "Does the Ministry of Mines have enough professionals who can negotiate with multinational oil and mining companies?" they wondered. Andy Clay, mining consultant from Deloitte South Africa, said that sharing resources and building oil infrastructure is a commendable idea.

"It needs a huge financial resource. East African countries cannot do it alone. They need the assistance of international financial institutions, like the World Bank," he said. Deloitte can consult and work with the East African governments, he continued, and the oil and gas companies on these types of project. Some of the participants, however, raised the question of peace and stability in the region. Fisseha-Tsion Menghistu (Prof.), vice president of the International Leadership Institute, said that conflicts were the stumbling blocks for such joint infrastructure development projects. "How can you talk about such major infrastructure development projects in the absence of peace and stability? Twenty six African states are regarded as fragile states. This means that they cannot sustain peace and stability. How can you build oil pipelines and refineries if the countries cannot maintain peace and stability? Look what is happening in South Sudan," Fisseha-Tsion said.

Deloitte organized another workshop for mining companies and artisanal miners on Tuesday at the same venue. Representatives mentioned that international mining companies are running away from gold exploration projects due to the declining price of gold in the international market. "We have not seen a new mine being opened in Ethiopia in the past 25 years. Big multinational mining companies come to Ethiopia and start exploration activities, but they abandon the projects and pull out of the country. So the Ministry of Mines should improve the existing mining laws in such away that it can attract foreign investments," they noted.

The participants said that foreign companies should be allowed to engage in alluvial gold exploration and production projects, in partnership with artisanal miners. The draft mining law restricts alluvial gold production to only Ethiopian citizens. An expert from the Ministry of Mines, Berhe G. Silassie, said that it has been revising the mining and petroleum regulations in a manner that could attract investments. "Our mining and petroleum laws encourage investments. We have competitive laws but limitations in implementing them. We have a capacity problem, and are working on capacity building programs with our development partners," Berhe said. Regarding alluvial gold production, Berhe said that alluvial gold can be explored and produced by local knowledge and capital. He said that as it does not need much capital or investment, even cooperatives are able to do the job. "So this area is restricted for nationals. We need foreign investors to engage in the exploration and production of primary gold," he said.

Deloitte Ethiopia held a similar discussion with artisanal miners. Different mining equipment was displayed during the workshop, and The Ministry of Mines granted mineral exploration and production licenses for 260 companies. The country earns USD 600 million annually from the export of minerals, while artisanal miners sell 8.3 tons of gold valued at USD 450 million every year to the National Bank of Ethiopia.


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